The Securities and Exchange Commission has adopted rules that will require companies to file financial reports using interactive data, or XBRL (eXtensible Business Reporting Language). The SEC believes that this new format will make financial information easier for investors to analyze and has the potential to increase the speed, accuracy, and usabilityof financial disclosure, eventually reducing costs.
The rule will be phased in according to company size as follows:
- Domestic and foreign large accelerated filers that have a worldwide public common equity float above $5 billion were required to comply beginning with their first 10-Q or quarterly report for a fiscal period ending on or after June 15, 2009,
- All other domestic and foreign large accelerated filers will be required to comply beginning with their first 10-Q or other quarterly report for a fiscal period ending on or after June 15, 2010, and
- All remaining filers, including smaller reporting companies, will be required to comply beginning with their first 10-Q for a fiscal period ending on or after June 15, 2011.
XBRL is an electronic filing system format that defines or “tags” individual data items in financial statements using certain standard definitions, enabling information to be downloaded directly into spreadsheets and other software tools. The SEC anticipates that using XBRL will result in rapid analysis and comparison among multiple companies, reporting periods and industries, thereby eventually reducing the cost of analysis and summary of information. The standardized tags contain financial statement items and the following contextual information that enable the data to be recognized:
- Descriptive labels,
- Authoritative references to U.S. generally accepted accounting principles (GAAP), and
- SEC regulations.
In an effort to ease the transition to XBRL, during the first year they are subject to the new rules, filers will have the option to tag financial statement footnotes and schedules as individual blocks of text. After the first year, filers will also be required to tag detailed quantitative disclosures within footnotes and schedules. Filers who do not timely file interactive data exhibits will be considered not current in their Exchange Act reports and will not be eligible for purposes of Form S-3, S-8 and the adequate public information requirement of Rule 144. However, upon filing the required exhibits, filers will immediately regain compliance.
The SEC’s adopting release is available at http://www.sec.gov/rules/final/2009/33-9002.pdf
For more information on these rules, please contact one of our securities attorneys.